Wang Fengying, president of Great Wall Motor Co. told Automotive News last week that Great Wall wants to buy Jeep and was "connecting with FCA" to begin negotiations.
Fiat Chrysler subsequently denied that it had been contacted, but the Italian-American automaker should not give Wang the cold shoulder. A deal would make perfect sense not only for Great Wall, but also Fiat Chrysler.
For Great Wall, acquiring the venerable Jeep brand would allow it to achieve two major strategic goals that it has failed to accomplish on its own.
The company’s first goal is to gain access to North America, a market that it has coveted for a long time.
In 2008, Wang told Automotive News China that she expected to sell vehicles in the United States within the next five years. So far, the company has not made any meaningful progress, although Great Wall recently scouted potential locations for a Mexican assembly plant.
Great Wall’s second goal is to upgrade the technologies of its SUV product line. That would help the company’s campaign to shift its model lineup upscale -- a strategy that so far has had little success.
In 2014, Great Wall introduced the Haval H8, the company’s first SUV with a starting price above 200,000 yuan ($30,300).
After a lengthy effort to fix the vehicle’s uncooperative transmission, Great Wall hired German supplier ZF to solve the problem. But demand for the H8 has been limited.
If Great Wall purchases Jeep, the company would gain valuable access to technology. That would allow Great Wall to emulate Geely Chairman Li Shufu, who acquired Volvo in 2010.
Geely and Volvo jointly developed a platform for compact vehicles, and now the first batch of products is about to hit the market.
FCA’s gain
While Jeep would offer great benefits to Great Wall, Fiat Chrysler also has something to gain.
Great Wall is likely to pay a higher price for Jeep than other automakers because it specializes in SUVs.
Morgan Stanley, a U.S. investment bank, estimates the Jeep brand is worth $24.2 billion. Great Wall, a profitable company, should not have much trouble financing the deal.
Great Wall could dip into its cash reserves and raise capital on the Hong Kong and Shanghai stock exchanges, where it is listed. If needed, Chinese banks would be happy to help finance the deal, as they did with Geely seven years ago.
With Great Wall as the new owner, Jeep would have an opportunity to grow quickly in China. That would mollify Chinese regulators who are nervous about corporate investment in foreign assets.
And it would reintroduce Jeep in a market where consumers have great affection for it. Jeep began producing vehicles in China in 1983, but its joint venture with Beijing Auto eventually died after it was badly mismanaged.
In 2015, a joint venture between FCA and Guangzhou Automobile Co. resumed production, but sales remain limited.
In the first six months of 2017, deliveries of the three locally produced Jeep models -- the Cherokee, Renegade and Compass -- totaled 107,000 vehicles.
That’s a small niche in a market that generated sales of 4.6 million SUVs and crossovers.
Fiat Chrysler CEO Sergio Marchionne may be hard-pressed to find a more eager suitor than Great Wall. General Motors and Volkswagen Group have fended off Marchionne’s overtures, and no other global automaker has stepped forward.
Last week, three other Chinese automakers -- Geely, Dongfeng Motor Co. and Guangzhou Automobile -- indicated they have no intention to buy Jeep.
Great Wall is a strong candidate. Marchionne should not fumble the opportunity to negotiate a deal.
